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EU margin rules for non-centrally cleared derivatives finally adopted

An internationally agreed reform on the posting of initial margin for derivative contracts which are not subject to central clearing was set to take effect in the main jurisdictions around the world on 1 September 2016. However, the regulatory technical standards (“RTS”) implementing these rules in the EU have been delayed, causing the EU to miss the international deadline. Other jurisdictions like Australia, Hong Kong and Singapore have also announced delays.

Difficulties became apparent when the Commission announced on 9 June that it would delay the adoption of the RTS, originally proposed by the European Supervisory Authorities (“ESAs”) already on 8 March. This prompted an official letter from the ESAs expressing concern about the situation and pointing out the uncertainty and cross-border issues that a delay would cause. The Commission finally endorsed an amended RTS on 28 July, with a crucial modification removing concentration limits on initial margins for pension scheme arrangements. This subsequently led the ESAs to issue a non-binding opinion expressing criticism towards the version of the rules proposed by the Commission.

In the end, the Commission decided to ignore the ESA opinion and finally adopted its version of the rules on 4 October. In order to speed up their entry into force, the European Parliament waived its 3-month scrutiny period of the rules on 26 October. A similar and widely expected non-objection decision of the Council will now enable an early entry into force of the RTS.

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